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Journalism of Courage
NEW DELHI, JAN 14: The Indian Oil Corporation IOC will hit the domestic market to offload five per cent of government equity in March next as part of the disinvestment drive. According to highly placed finance ministry officials, the IOC disinvestment in the domestic market was expected to fetch Rs 800 crore.
This, the officials pointed out, would be in addition to the cabinet decision of selling IOC equity through buyback route or to another public sector undertaking which was expected to mop up Rs 1,700 crore.
Clarifying the exact position after the cabinet decision, officials said sale of government equity through buyback or selling it to other PSUs was being preferred as there was no transaction cost involved and also it could be done quickly unlike disinvestment in domestic or international markets.
It was stated that out of the various public sector companies, which were being considered by the government for buyback, only MTNL and Nalco would be given the option in a pure sense of term this fiscal. The oil companies including IOC, ONGC and Gail would swap their equities.
The officials said that BHEL and BPCL would not be given such an option. These companies were earlier being considered by the government for buy back option.
While MTNL would be allowed to buy back shares to the tune of five per cent, in case of Nalco no such figure has been decided so far, the sources said.
Under the equity swap among oil companies, ten per cent shares of ONGC and IOC would be transferred to each other. Besides, 2.5 per cent of share of ONGC would be transferred to GAIL. On the other hand, GAIL8217;s five per cent shares would be sold to ONGC and IOC each.
The sources said it was suggested to these three companies to go for equity swapping so that they could have virtual integration. In the era of free market prices, stand-alone refineries or stand-alone exploration and production companies would be exposed to greater risks with excessive uncertainties regarding their profit margins. By equity swapping these companies would be integrated, while fiercely competing in the market place as well, they said.
In case of the VSNL, no such option could be given as the company was in the process of announcing its GDR issue. Any company can buy back shares only after 60 days of floating GDR issue, the sources said adding that though VSNL could not go for buy back this year, it would definitely do so in the next fiscal.
The sources said disinvestment process was currently on through three different routes8211; floating of GDR, strategic sales and buy-back. While the process of floating GDR is currently on in four companies namely Concor, GAIL, IOC and VSNL, many companies, including Modern Food Industries and ITDC have been identified for the strategic sale of government holding.
